The Chinese digital yuan pilot program in Hong Kong is believed to be contributing to the surge in cross-border payments, according to media reports. China Fund News, via the Securities Times, has reported a tenfold increase in certain types of cross-border payments between Mainland China and Hong Kong, as well as between the mainland and Macau, over the past year. While the digital yuan is not the sole driving force behind this rise, it is considered to be one of the key factors.
The digital yuan is currently only legal tender in Mainland China, as both Hong Kong and Macau have their own separate currencies and economic systems. However, the People’s Bank of China (PBoC) has been actively exploring ways for Hong Kongers and mainlanders to use the digital yuan for cross-border transactions. One innovation introduced allows Hong Kong residents to purchase e-CNY hard wallet cards using the Octopus app, which is the most widely used e-pay app in Hong Kong.
These cards can be used at various locations in the Guangdong-Hong Kong-Macau Greater Bay Area. The PBoC has also incentivized adoption by offering Hong Kong users discounts of up to 20% at designated retailers. Additionally, Shenzhen has started accepting e-CNY hard wallet payments on two of its busiest bus lines and plans to expand coverage to all bus routes in the future. The PBoC’s Shenzhen branch has deployed 17 card-issuing machines, issuing over 18,000 CBDC hard wallet cards to Hong Kong residents.
Furthermore, efforts have been made to facilitate payments from Mainland Chinese travelers to Hong Kong, with over 200 Hong Kong outlets now accepting e-CNY payments. Banking platforms allow merchants in Hong Kong to accept digital yuan payments from Mainland Chinese customers, with the digital currency instantly converted to Hong Kong dollars. Popular stores among mainlanders, such as Duty Zero by CDF, IW Hotel in Kwun Tong district, and the Balabala children’s clothing chain, have also adopted the digital yuan.